With a construction loan, can I walk away from the deal & have the builder keep the house? Is this forclosure?

Answer 1

This would depend on who is holding the construction loan. Many times what you will find with some of the larger builders and those who build mass amounts of homes in subdivisions, that THEY will fund the construction of the home and then all you need to do is find the end loan and basically just buy the house from them.

If you have not been to an actual closing, then you are NOT liable for the loan. If you have merely agreed to buy the home when it is done, put some earnest money down for good faith, then you are clean. Well...you would lose your earnest money.

This will mainly depend on who's name the construction loan is in. Now, if you actually got the construction loan, and went to closing and everything, then you are responsible for the loan.

If you have anymore questions, please feel free to contact me at timothy.kazee@americanhm .com. Good luck.

Answer 2

Your builder may or may not be interested in owning this house. Is the builder carrying the cost of the building, he may be willing to simply have you sign a quit claim deed to the property over to him. If you have the construction loan and the builder has been paid for his work thus far, he probably won't be interested in accepting a quit claim deed since he would not be able to resell the property without satisfying the construction loan. Your other options are to list the property for sale and try to get out from under the loan by selling the property to someone else or contacting the lender and talk to them about a deed in lieu of foreclosure which basically means deeding the property to the bank without going through a foreclosure process. Unless you owe a lot more than what the property is worth, your best bet is to try to sell it fast and let the next buyer finish what you started.

Answer 3

It depends. If the builder has made a sub-standard house then you should not be forced to buy it. If you have not closed on the house, you probably can back out of the purchase agreement (depends from state to state).

If you are unable to complete the sale due to reduced circumstances (e.g. lost job) then completing the sale would force undue hardship and all parties would be best off walking away from the deal.

Foreclosure is when you have closed the deal and are paying on the note, and then stop payments. You may have abandoned the house, or not. The bank then pursues the debt and forecloses the property once uncollectible.

Answer 4

No. The construction loan is with a bank. The builder is exactly that, a builder. They are paid for work completed through draws.

You took out a loan for the home. You are responsible.

It will cost you far more in default than it will if you take responsibility.

Answer 5

Only if it allowed in the documentation you signed or if you can prove the builder has breached the contract.
Most of these issues end up in court, so good luck when you get there.